This study focuses on the impact of remittances on Vietnam’s financial development. The results drawn from its quantitative approach demonstrate that although remittance flows to the country may lead to increase in bank deposits, such increase is not high. | 46 Pham Thi Hoang Anh / Journal of Economic Development 22 (3) 46-58 Impact of Remittances on Financial Development in Vietnam PHAM THI HOANG ANH Banking Academy of Vietnam – hoanganhbav@ ARTICLE INFO ABSTRACT Article history: This study focuses on the impact of remittances on Vietnam’s financial development. The results drawn from its quantitative approach demonstrate that although remittance flows to the country may lead to increase in bank deposits, such increase is not high. On the other hand, reduction in credit demands may be subject to remittance flows, per the financial development based on a few credit growth indicators. In other words, effects of remittance flows, as indicated by VAR model, are not noticeable despite their positive impact, as in examples of increased deposits and remittance payment services on their current growth. Based on these findings, the study suggests several implications that improve the positivity of impact on the financial development. Received: Aug. 18. 2014 Received in revised form: Apr. 02. 2015 Accepted: Jun. 28. 2015 Keywords: remittances, financial development, VAR, Vietnam. Pham Thi Hoang Anh / Journal of Economic Development 22 (3) 46-58 47 1. General issues regarding financial development Financial development of a nation acts as one of the stimulants to investment and economic growth, especially in developing countries. It is determined by bank loans to private sector, or market capitalization to GDP, accompanied by income. Developed countries possess better refined financial systems, enabling them to carry out the mediation function more effectively than developing ones. This is realized by the fact that more diversified financial structures have come into effect: capital flows cycling in these economies do not just come from the banking systems but are also derived from bond or stock markets. Developed countries, to put it differently, adopt .
